Although they may seem simple on the surface, the details of electric power and what it means for your energy bill can be complicated. Dealing with the utility company or its contractors can be all the more difficult for the confusing jumble of terms used. Below, the most important terms are defined, so that energy customers may have a better idea of just what their electric bill is really saying.

Electric demand - The maximum amount of electric power used at a specific time, often evaluated in 15-minute increments. Demand charges are more likely to be issued to commercial customers than they are to residential customers.

Actual Versus Estimated Reading - An actual reading is the recorded energy usage for a meter in a given month. Estimated reading refers to an estimated monthly charge based on past usage and outdoor temperatures. Energy is measured in units of kilowatt hours, abbreviated as kWh. The meter reading will determine a consumer's bill.

Generation Charges - The cost of creating the electricity, as paid by the utility company and passed onto the consumer.

Transmission Charges - Charges to transfer electricity from power stations to the electricity delivery system. Charges are mandated by the Federal Energy Regulatory Commission.

Distribution Charges - Cover the cost of delivering electricity to a customer's home or business via wires or cables.

Alternative Energy Portfolio Standard - Covers the cost of energy purchased from alternative energy sources. In Pennsylvania, for example, this is mandated by the AEPS Act.

Solar - An alternative source of energy, created by capturing the sun's rays, most commonly through solar panels, and converting the heat into energy.

State Tax Adjustment - A credit or charge due to changes in the state tax.

Contractor - A third party energy company hired by the electric company to handle installation, equipment repairs and any other services agreed to in their contract with the consumer.

Electric companies in the United States date back to the late nineteenth century. Since then, utility companies have transmitted power over long distances from centralized generating plants. A power company is responsible for high voltage lines and the transformers that adjust the voltage to levels suitable for home or industrial consumption.
The second kind of electric company is a contractor that installs equipment and wiring. They may work on residential or commercial products. Some specialize in outdoor installations, such as for parks. Most electrical appliances, however, operate indoors. They include kitchen appliances and heaters. Contractors may also install and repair small local power generating machines. These commonly include gas powered generators and solar panels.
Utility companies may also provide and bill for water and natural gas, or they may focus entirely on electricity. Energy use is generally billed according to set rates. In many cases, energy is cheaper at off peak hours. Charges are determined by a meter connected to the building's electricity supply. The utility is generally responsible for the meter and cables and wires that connect the building to the grid. They are not responsible for wiring inside the building itself.
Environmental and supply concerns have led to recent significant changes in electricity generation. Renewable energy is making headway against the old fossil fuel standbys. Solar and wind power show a lot of potential. A growing trend is for residences and small businesses to generate their own power, often through solar. In some cases, these systems are connected to the grid, allowing the homeowner to become an electricity supplier in his own right. This is causing changes in the way power is generated and sold.